Institutional investment allocations, sponsor consolidation, bank-private equity origination partnerships, NAV volume − plenty of long-term themes in this week’s private market news. Here’s what we’re reading.

• NAV transactions totaled an estimated $21 billion in 2022 even as broader loan market origination struggled, according to Rede Partners’ recent NAV Financing Market Report. An overwhelming majority of lenders report seeing more inbound NAV opportunities in 2022 than in 2021 even as loan margins widened.
• Calpers is going into an extensive portfolio review next month with an appetite to increase its allocation to private equity from $52 billion currently. See the Financial Times’ “Calpers signals ‘appetite’ to increase bets on private equity.”
• Falling interest rates and expanding liquidity over the past decade obscured just how much beta has contributed to investment performance. That dynamic is changing, and future institutional asset allocation practices will develop to better separate out beta in core equity and fixed income allocations with a greater share of allocations in the future going to equity and fixed income alternatives, such as private credit, asset-based financing and hybrid equity, according to views published in an Apollo Investor Presentation in mid-May. In the private market, wealth management channels are expected to be a key driver of AUM growth for Apollo.
• Strategic M&A among private sponsors faces many obstacles ranging from culture fit and integration to valuing and financing an acquisition. Not surprisingly, tie-ups have historically been relatively rare compared to the number of sponsors in existence. In 2021, strategic transactions perked up and consolidation will likely increase further from here, according to Bain & Co.’s Is Strategic M&A Finally Catching On in Private Capital? Aside from the compelling reasons for consolidation cited in the Bain report − AUM growth and the benefits derived from scale − we think middle market sponsors may find access to fund finance more challenging in the year ahead, which could add another reason to consider making a deal.
• Blackstone is open to partnering with regional banks as a participant in loan originations, according to the Financial Times’ “Blackstone in talks with US regional banks over lending partnerships.” Discussions with banks are reportedly focused on partnerships using the existing infrastructure at banks to originate loans that are ultimately channeled to insurance company balance sheets.